North West manufacturers still investing despite challenges

Three quarters of North West manufacturing and engineering businesses (75%) are expecting to grow their turnover in the next 12-months, according to an industry survey.

The annual MHA survey, compiled in conjunction with [North West] accountancy firm Moore and Smalley and Lloyds Banking Group, shows 93% of North West respondents intend to invest in research and development over the next year. This is above the national average of 88%.

Around six in ten (61%) North West manufacturers intend to increase staff numbers, while almost seven in 10 of those (68%) intend to take on apprentices or trainees. Again, this is higher than the national average of 57% and 59% respectively.

Over half (56%) of respondents are actively exporting and the Eurozone remains the most popular destination, followed by Asia (excluding China) and the rest of Europe.

The main challenges identified by respondents were raising the capital investment required for the push towards automation and increased production costs due to raw material price increases and expected wage growth.

Brexit uncertainty is also a risk factor, but fewer respondents than expected highlighted it as a concern, suggesting it’s still too early for manufacturers to tell how leaving the EU will impact their business.

Ginni Cooper, head of the manufacturing team at Moore and Smalley, said: “We’re very encouraged by the results of this year’s survey, with a quarter of North West respondents predicting growth of 10% or more and 43% predicting 5-10% growth within the next year.

“The number of businesses saying they are investing for growth is encouraging and it’s particularly pleasing to see the region innovating, as evidenced by the investment in R&D activity. The key drivers for this growth are expected to be increased demand from customers and expansion of existing product ranges.

“Despite the positive outlook, there are challenges and 61 per cent of respondents say they have had difficulty recruiting staff with the necessary skills. Another issue highlighted was the lack of knowledge about the support available for businesses.”

Dave Atkinson, head of UK manufacturing for Lloyds Bank, added: “It is clear that British manufacturers need further support to explore new opportunities in overseas markets. While the devaluation of sterling has accelerated export growth, businesses are still looking for support to source those new opportunities.

“It is also pleasing to see that capital investment levels are up on last year, which is encouraging as it suggests manufacturers continue to plan for the future and respond to changing conditions.”

Other key findings in the North West included:

  • The majority of those investing in R&D intend to spend between 1% and 4% of turnover in this area.
  • Awareness of R&D tax relief is rising with 70% of businesses expecting to take advantage of this tax break in the next 12-months.
  • Asked what government could do to help, North West respondents top answer was an expansion of manufacturing skills training in secondary, higher and further education.
  • This was followed closely by better tax breaks for capital investment to incentivise investment in automation.

MHA is a UK-wide network of independent accountancy and business advisory firms. The annual MHA Manufacturing and Engineering Survey, now in its sixth year, gathers data from over  460 manufacturing and engineering companies nationally.

In the North West, businesses surveyed came from a wide range of sectors including automotive, chemical, electrical, food and drink, metals and minerals, oil and gas and precision engineering. The majority of respondents were SMEs employing fewer than 250 staff.

To download a free copy of the report, please click here.

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